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NAB Summit on Cinema on Heels of Industry Changes

In the panel session “Improving Workflow for Digital Cinema Distribution” Michael Karagosian moderated, as (left to right, seated) Rob Springer of Cinedigm, Jim Mann of Technicolor, and Craig Seidel of MovieLabs explored how a theatre– once they’ve already made the investment in and installed digital DCI-compliant projectors and servers– can increase profitability by both improving the technical workflow and getting in new content for new audiences.

LAS VEGAS — 2012 was a watershed year in the history of cinema. So as the 2013 Summit on Cinema at NAB kicked off Saturday at the Las Vegas Convention Center, there was going to be a lot to process as attendees—having long since graduated from sitting through endless “The Future of Cinema” PowerPoints at trade events—were going to be looking for no-nonsense assessments of last year’s rollouts. Is the digital transition complete? What new technology introductions worked? What didn’t?

No conference or symposium can keep up with the speed at which the industry is being driven to change, particularly in the past 12-16 months. The cinema industry saw a flurry of activity in late 2011 and 2012 as the major cinema projector makers— Christie, Barco, and NEC (those three being the only licensed Texas Instruments’ DLP Cinema technology providers), and Sony (using its proprietary SXRD technology based on LCoS), were able to convert huge numbers screens to DCI-compliant digital projection. In 2008 there were fewer than 6,000 such screens. As of March 2012 (the latest data we had access to at NAB 2012), in the U.S. more than 27,000 screens had been converted (with half of those deploying full 3D digital as well).

At NAB’s Technology Summit on Cinema we learned from Michael Karagosian in his Saturday session “Update on the Digital Cinema Worldwide Rollout” that by the end of 2012, 89,000 digital screens worldwide (36,000 in North America) were digital. (About 50% of the converted screens are 3D.) This push was part of a $5B investment over the past few years, driven by VPF (Virtual Print Fee) subsidies, and the push by Hollywood studios to make theatres 3D-ready.

Karagosian said that there will be increased activity worldwide. For example in Latin America only about 5,000 screens (about half of the total number) are digital. So integrators in these markets (such as Arts Alliance Media, GDC, Sony Digital Cinema and Telem) could look forward to market growth on pace with what we’ve seen in the U.S. and Europe. The Asia-Pacific region has about 64% conversion; Africa/Middle East has seen only 20% conversion.

Karagosian, principal of MKPE Consulting, who has been a top consultant to NATO (National Association of Theatre Owners), explained that while the pace of change and conversion has been impressive, there are challenges remaining in any “complete” conversion, and even more challenges ahead as the industry adapts to new business models. It’s well known that although U.S. box office sales of movie tickets has ticked up modestly in the past two years, that increase has been the result of increased ticket prices not more unit sales. And in fact some theatre owners have put a price premium on tickets to 3D showings (this trend is more pronounced outside the U.S.). According to Karagosian, U.S. theatres have, for now, probably hit a kind of wall and won’t be able to raise ticket prices going forward. And those exhibitors are now burdened with higher debt levels resulting from the recent gear upgrades.

What about 4K? That is, higher resolution projection– digital projectors with 4K resolution or beyond (similar resolution to the image capture standards of the best conventional 35mm cameras still used on most big-budget Hollywood shoots). The 4K projection footprint at the end of 2012: about 20,000 projectors out there in commercial movie theatres worldwide are 4K, versus about 70,000 2K resolution projectors. Karagosian explained that there is a “sweet spot” in any individual theatre for high res. You have to be sitting closer to the screen to be able to resolve the added resolution. So any move to 4K in commercial theatres is going to involve only a portion of the market.

There will be more opportunities to grow and strengthen the cinema market going forward, as theatre operators look at new ways to get efficiency from existing investment. In a separate panel on Saturday “Improving Workflow for Digital Cinema Distribution” Karagosian moderated, as Rob Springer of Cinedigm, Jim Mann of Technicolor, and Craig Seidel of MovieLabs explored how a theatre– once they’ve already made the investment in and installed digital DCI-compliant projectors and servers– can increase profitability by both improving the technical workflow, and getting in new content for new audiences.

Currently, delivery of a DCP to the theatre can be by satellite, or hard drive, or (very high speed) Internet. The theatre’s KDM (Key Delivery Message) is a “key” to unlock the file (typically delivered by email– it’s just a very long code sequence). But in that process, there are today lots of ways to get the content, get the KDM, and point the DCP to a server in the theater. It’s a hodge podge of technology– involving fingerprinting, content protections, authorization updates– from different (competing) vendors. The panel all agreed that there are many ways to improve efficiency– some of those on the technology side as standards issues play out, and some on the management side as all players learn to better organize delivery protocols that have more to do with things like studios’ poorly scheduled UPS pick up of hard drives. (That last conclusion based on a question from the audience from a theatre operator at the conclusion of the “Improving Workflow for Digital Cinema Distribution” session.) As much as we all love new technology, it seems some things never change.